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Sherritt reports 4Q18 and FY18 financial results

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Global Mining Review,

Sherritt International Corp. has reported its financial results for the three- and 12-month periods ended 31 December 2018.

CEO commentary

“Sherritt ended 2018 with lower debt and more cash than we started the year with as a result of several initiatives designed to reduce expenses, buy back CAN$130 million of outstanding debentures and improve production reliability at our operations,” said David Pathe, President and CEO of Sherritt International. “Although concerns of international trade disputes and the impacts of tariffs have resulted in recent commodity price volatility, we expect to sustain our momentum through 2019 and beyond by capitalising on the strong market fundamentals and outlook for Class 1 nickel, completing drilling on Block 10, and identifying opportunities where we can bring innovations developed by our Technologies Group to market,” added Pathe.

Highlights for 4Q18 and FY2018

  • Sherritt’s share of finished nickel production at the Moa Joint Venture (Moa JV) in 4Q18 was 4294 t, up 4% from last year, while finished cobalt was 428 t, down 8% from 4Q17. Production for 4Q18 was impacted by the disruption in the supply of hydrogen sulphide, a key reagent used in the production of finished nickel and cobalt at the refinery in Fort Saskatchewan, as previously disclosed.
  • 4Q18 Adjusted EBITDA was CAN$17.7 million, down from CAN$49.6 million in 4Q17. The decrease was due to a number of factors, including lower contributions from the Oil and Gas business, lower cobalt sales and higher input costs, including higher sulfur and energy prices, at the Moa JV.
  • Received CAN$6.7 million in distributions from the Moa JV in 4Q18 for a total of CAN$11.9 million in distributions for FY2018. 4Q18 marks the second consecutive quarter that the Moa JV has made distributions, indicative of improved nickel prices over the past several quarters.
  • Net direct cash cost (NDCC) at the Moa JV for FY2018 was US$2.24 per pound of finished nickel sold, in line with the US$1.90 - US$2.40 per pound guidance that Sherritt provided for the year. NDCC for 2018 ranked the Moa JV within the lowest cost quartile relative to other producers and ranked it as the lowest cost nickel HPAL operation according to annualised information tracked by Wood Mackenzie.
  • Cash from continuing operations in FY2018 was CAN$7.4 million compared to cash flow used of CAN$9.6 million in FY2017. The improvement was driven largely by the receipt of distributions from the Moa JV, lower interest payments on debentures and increased fertilizer customer prepayments.
  • Sherritt ended the year with cash, cash equivalents and short-term investments of CAN$207.0 million, up from CAN$203.0 million at the end of 2017. The increase was due to a combination of factors, including the receipt of distributions, working capital and advance repayments from the Moa JV totaling CAN$47.7 million, reduced interest payments of CAN$6.3 million and reduced administrative expenses of CAN$6.1 million, excluding the reduction of share-based compensation. The lower administrative expenses were due to various cost-savings initiatives, including lower consulting fees, reduced employee costs and the relocation of the Toronto corporate office.

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